MATERIAL ADVERSE EFFECT CLAUSE IN CORPORATE COMMERCIAL TRANSACTIONS

ABSTRACT

A material adverse effect is capable of putting an end to a contract. The right to this termination which is significantly pegged on the terms of a material adverse effect clause has only been enforced so far in limited cases. This article examines the ways courts have interpreted and enforced these clauses and it analyses the loopholes that have deprived many claimants of the right to back out of contracts. Some of these are the choice of words in crafting the clause, the effect of the act concerned not being material enough or other faults of either of the parties. Although enforcing the clause is fraught with technicalities, it is achievable with careful negotiation, efficient contract drafting and discharge of burdens of proof. With this, an aggrieved party can properly manage its risk exposure by exploring the options of renegotiating or exiting the contract.

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UNILAG Law Review, (2022) Volume 5 Edition 2

About the Author

Final year law student at the University of Lagos, Nigeria. Contact: euniceeadekunle@gmail.com